Stamatis Tsantanis, a shipping executive, says that the planned strike at U.S. East Coast and Gulf ports would happen at the worst possible time—during the holiday season. The strike could also make rail travel more difficult. Analysts, on the other hand, say that the chaos could be good for some businesses.
The International Longshoremen’s Association and the United States Maritime Alliance’s current contract is set to end on September 30, which means the lockdown of the port is getting near.
“A port strike now would be the worst thing that could happen because it could affect Christmas shopping and cause things to run out or not arrive on time,” Seanergy Maritime Holdings Corp. SHIP -2.63% and United Maritime Corp. USEA -2.65% CEO Tsantanis said in a statement. “It won’t stop kids from getting toys for Christmas, but it can really hurt goods coming into the U.S.”
Tsantanis says that sending more containers to ports on the West Coast is also causing worry about the possibility of rail congestion at those ports. “Hardware shortages and rail dwells could happen in the next two months if Southern California’s already busy docks keep getting more cargo because of a possible port strike on the East and Gulf coasts and rail problems in Canada,” he said.
Susquehanna Financial Group says that big railroads that serve the Western U.S. have seen an increase in containers before the possible strike. An analyst at Susquehanna Financial Group wrote in a note released Thursday that both Union Pacific Corp. UNP 0.49% and BNSF have gained from the West Coast container surge. This is because shippers got ahead of a possible East Coast port strike by putting their containers on the West Coast.
According to J.P. Morgan, closing down ports on the East Coast and Gulf would cost the economy between $3.8 billion and $4.5 billion every day. However, some of that money would be returned over time once business resumed as usual.
J.P. Morgan expert Brian Ossenbeck says that a long outage could actually help a freight market that is falling. “Recent freight recessions ended quickly when something shook the market, like a deep freeze in Texas, several hurricanes, or changes to the rules,” he wrote. The analyst says that a possible ILA strike could help end “the current malaise,” especially if it lasts long enough to cause time-sensitive demand during the traditional seasonal peak in the fourth quarter. Because of this, Ossenbeck said, freight rates would go up for companies like Knight-Swift Transportation Holdings Inc. KNX 2.37% and J.B. Hunt Transport Services Inc. JBHT 0.58% that own their own trucks.
This would likely increase the need for fast air and ground freight, which would be good for RXO Inc. RXO 1.14%, C.H. Robinson Worldwide Inc. CHRW 0.95%, and Expediters International of Washington Inc. EXPD 1.06%, the expert said.
